Grainger partners with APG to create GRIP

Grainger partners with APG to create GRIP

Grainger plc, the UK's largest listed residential landlord, is pleased to announce the creation of the GRIP unit trust in partnership with APG Strategic Real Estate Pool ("APG"). APG is Europe's largest pension fund asset manager with €325bn of assets under management.

GRIP has been formed by Grainger and APG to acquire the residential property portfolio owned by G:res1 ("G:res"), a UK market-rented residential property fund established and managed by Grainger since 2005, worth approximately £349.4m. Grainger owns a 26.2% equity stake in G:res worth approximately £50.7m.

In June 2011 G:res shareholders voted to progressively liquidate the fund, and today’s announced transaction accelerates that process providing certainty to shareholders ahead of schedule.

APG is making an investment of £158.0m in GRIP. Alongside this Grainger will co-invest £59.0m, as a condition of the transaction, comprising its proceeds from its stake in G:res (following completion adjustments) and an additional £9.1m of new equity.

GRIP's aim will be to grow by investing in predominantly stabilised, market-let blocks and portfolios focused on Greater London. GRIP will also have scope to invest in Build to Rent development opportunities. GRIP, which is structured as a long term fund with five year renewable terms, will be seeking additional equity from one or two other like-minded institutional investors to grow the fund further.

Grainger will provide fund, asset and property management services to GRIP via a dedicated management team led by fund manager Michael Lamyman. Grainger will be paid management fees by GRIP which are broadly in line with the fees it would otherwise have received in 2013 for G:res, as well as the potential to earn additional performance fees.

The GRIP transaction follows Grainger's recently completed German JV with Heitman and is a significant milestone in the Company's strategy of growing its fund and third party asset management business and associated fee income.

Andrew Cunningham, Chief Executive of Grainger, said:

"We are delighted to be establishing this partnership with APG, one of the world's largest and most experienced institutional real estate investors, who are well known for long term, responsible investment. We see APG's commitment as a clear acknowledgement of UK residential property's growing appeal as an institutional asset class, as well as a significant endorsement of Grainger's expertise in the UK residential sector and the strength of our operational platform. We look forward to working with APG to drive long term value within GRIP."

Robert-Jan Foortse, APG head of European real estate, said:

"APG has a long history of investing in residential real estate, mainly in the Netherlands. We believe prospects for the Greater London rental market are promising and we are enthusiastic about adding this exposure to our portfolio. APG has been a shareholder in Grainger plc for several years and we are pleased to expand our relationship with Grainger via this partnership. This transaction demonstrates our willingness and aptitude for working with investment managers to modernise, recapitalise and extend the life of existing vehicles owning good quality real estate."

Further terms of the agreement:

It is the investor’s ambition to grow GRIP, and in order to support this ambition Grainger will provide GRIP with a first right of refusal over defined property acquisition opportunities consistent with GRIP’s investment criteria.

Grainger will be required to retain its initial investment in GRIP for so long as it is fund adviser or property manager of GRIP. In the event of termination of Grainger from these roles, a material breach by Grainger of its duties under these roles, or a change of control in Grainger plc, Grainger may be required to sell its stake in GRIP either to GRIP or to GRIP's investors. In addition, in certain circumstances the other investors in GRIP may also be able to require Grainger to sell its investment to a third party purchaser to whom the other GRIP investors have agreed to sell their investment in GRIP.